Day 5 - Trading Comparables and LBO Valuation

Day 5 (am) - Trading Comparables Fundamentals

Once participants understand the different approaches to valuation they are then introduced to the details of comparable company analysis. Multiples are calculated on both a historical and forecasted basis and participants will assess the value of the case company based on a given set of comparables. Public information books (“PIBs”) are used throughout the session.

Key topics:

• Calculating the company’s value
• Number of shares and value of share options
• Equity value
• Net debt calculations
• Enterprise value
• Calculating the earnings numbers
• Cleaning non-recurring items from earnings
• Calendarization issues
• Last-twelve months analysis
• Calculating a range of forward looking and historical earnings multiples
• Revenue
• EBITDA
• EBIT
• PE
• PEG
• Other value driver metrics
• Applying the results

Day 5 (pm) - LBO Valuation

Participants are introduced to the basic concepts underlying leveraged buyouts. The session starts by establishing why private equity firms can create value through leveraged buyouts and how the levered valuation fits into the valuation roadmap. Using a simple free cash flow forecast, participants establish how much a financial buyer could pay for the target company. Participants then build a simple LBO model.

Key topics:

• What an LBO is and how it can create value
• LBO valuation as an alternative valuation methodology
• Characteristics of suitable LBO candidates
• Estimating cash flows available to capital holders
• Estimating debt capacity
• Simplified debt / equity split for entry capital structure
• Sources and uses of funds
• Debt structure
• Estimating the exit value
• Calculating the IRR
• Sensitizing the model